Tuesday, February 9, 2010

This week's reading ought to be familiar to veteran SWEET scholars. Once again were back to Hayek's ideas on spontaneous organization of markets. The key insight I find from his distinction between two types of order - taxis and kosmos - is that systems like markets need not arise from the direction of any intelligent design, it can simply arise as an unintended consequence of our natural actions.

Ok I know that this probably won't help to answer your question well, but I'll run with this thought. Economics as discipline (note I really REALLY wanted to say science here but refrained to)hasn't been around very long. You got Adam Smith ("the father of Economic thought" who came along during the 18th century however at the time he was considered a moral philosopher rather than and economist. I know Hayek came in to play about a century after Darwin, but I think his ideas though make total sense where less realized than Darwin's were in the Biology field because the base of knowledge in the field of Economics to reiterate Hayek's argument wasn't there in the sense it was in Biology where data was collected for thousands of years.

I would argue that Economics is basically branch of 'applied biology'.

So to answer Richard's question, the reason it took so long for someone to articulate the view that markets arise without conscious design, is that people have been beaten beaten into submission by a religious view of biology.

Central to almost every western religion is the concept that man stands apart from nature. The view is that we are a direct creation of god, in its image. To this day, the religious have no real problem accepting the idea that modern dogs evolved from wolf-like ancestors, or that modern dogs and wolves share a common ancestor, but they will hesitate to admit that humans and apes share a common ancestor in the distant past. (The fact that all life on earth has a shared common ancestry is rock solid. It is one of the things that we know with a very high degree of certainty. The evidence for it is overwhelming.)

Because economics deals with the behavior of man, both on a large and small scale, we see purpose in everything. We actively order our own lives. We strive to create order. Most of us would say that our own lives are the product of conscious, intelligent design. It's very easy to scale up that view to encompass the whole of mankind. Not only, the thought goes, are we made in the image of an all powerful creator, but we ourselves are powerful creators. Why shouldn't the economy that exists be an extension of our creative power.

The self organizing, emerging complexity, of markets is a kick to the nuts of our intellect and our pride. Every time we fail to improve the economy by direct intervention is another kick.

I'm guessing that articulating the view that order of this type can emerge by itself takes some humility. Humility among economists is a rare commodity.